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This publication is available at https://www.gov.uk/government/publications/spring-budget-2017-overview-of-tax-legislation-and-rates-ootlar/spring-budget-2017-overview-of-tax-legislation-and-rates-ootlar

Introduction

This document sets out the detail of each tax policy measure announced at Spring Budget 2017. It is intended for tax practitioners and others with an interest in tax policy changes, especially those who will be involved in consultations both on the policy and on draft legislation. The information is set out as follows:

Section 1 provides detail on all tax measures to be legislated in Finance Bill 2017. This includes confirmation of previously announced policy changes and explains where changes, if any, have been made following consultation on the draft legislation. It also sets out new measures announced at Spring Budget 2017, where they will be in Finance Bill 2017.

Section 2 provides details of all tax measures announced at Spring Budget 2017 which are not included in Finance Bill 2017. Any tax changes will be legislated for as necessary. References to ‘Finance Bill 2017-18’ refer to the Finance Bill which will be introduced to Parliament following Autumn Budget 2017.

Table 1 lists measures in this document without a corresponding announcement in the Budget report.

1. Finance Bill 2017

Income Tax

1.1 Income Tax charge and rates: tax year 2017 to 2018

In Finance Bill 2017, the government will set the charge for Income Tax, and the corresponding rates, as it does every year. However, following legislation introduced in section 6 of Finance Act 2016 to separate the ‘main rates’ out into 3 distinct groups, it will set these different rates separately for the first time. Finance Bill 2017 will therefore set:

the ‘main rates’, which will apply to ‘non-savings, non-dividend’ income of taxpayers in England, Wales and Northern Ireland

the ‘savings rates’, which will apply to savings income of all UK taxpayers

the ‘default rates’, which will apply to a very limited category of income taxpayers that will not fall within the above 2 groups, made-up primarily of trustees and non-residents

In addition, from April 2017 the Income Tax rates and thresholds on non-savings, non-dividend income for Scottish taxpayers will be set by the Scottish Parliament. The changes introduced in Finance Act 2016 will ensure that once the Scottish Parliament’s Income Tax powers come into effect, MPs in England, Wales and Northern Ireland will have the final say on Income Tax rates that primarily affect their constituents. This will meet the government’s commitment to ensure that the ‘English Votes for English Laws’ procedure can apply to the ‘main rates’ of Income Tax.

1.2 Dividend allowance reduction

As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to reduce the tax-free allowance for dividend income from £5,000 to £2,000. This will reduce the tax differential between the employed and self-employed on one hand and those working through a company on the other, and raise revenue to invest in our public services. The change will take place from April 2018

1.3 Trading and property income allowances

As announced at Budget 2016, and confirmed at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to create 2 new Income Tax allowances of £1,000 each, for trading and property income. The allowances can be deducted from income instead of actual expenses. As announced at Autumn Statement 2016, the trading allowance will also apply to certain miscellaneous income from providing assets or services.

Following the publication of the draft legislation, revisions will be made to prevent the allowances from applying to income of a participator in a connected close company or to any income of a partner from their partnership. Minor revisions will also be made to improve clarity and correct errors.

1.4 Amendments to Social Investment Tax Relief

As announced at Autumn Statement 2016, the government will amend the requirements for the Social Investment Tax Relief (SITR) scheme. These amendments:

increase the amount of investment a social investment may receive over its lifetime to £1.5 million for social enterprises that receive their initial risk finance investment no later than 7 years after their first commercial sale, the current limit will continue to apply to older social enterprises

exclude certain activities, including asset leasing and on-lending, to ensure the scheme is well targeted - investment in nursing homes and residential care homes will be excluded initially, however the government intends to introduce an accreditation system to allow such investment to qualify for SITR in the future

exclude the use of money raised under the SITR to pay off existing loans

clarify that individuals will be eligible to claim relief under the SITR only if they are independent from the social enterprise

introduce a provision to exclude investments where arrangements are put in place with the main purpose of delivering a benefit to an individual or party connected to the social enterprise

The changes will take effect for investments made on or after 6 April 2017.

1.5 Tax-advantaged venture capital schemes

As announced at Autumn Statement 2016, the government will amend the requirements of the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs). These amendments:

clarify the EIS and SEIS rules for share conversion rights - the rights to convert shares from one class to another will be excluded from being an arrangement for the disposal of those shares within the no pre-arranged exits requirements for the EIS and SEIS for shares issued on or after 5 December 2016

provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures, to align with EIS provisions, for investments made on or after 6 April 2017

introduce a power to enable VCT regulations to be made in relation to certain share for share exchanges to provide greater certainty to VCTs, which will take effect on the date from which Finance Bill 2017 receives Royal Assent

A summary of responses to a consultation on options to streamline and prioritise the advance assurance service will be published after the Budget.

Employment and benefits in kind

1.6 Alignment of dates for making good on benefits in kind (BiKs)

As announced at Autumn Statement 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to align the dates for making good on BiKs, where an employee makes a payment in return for the BiK they receive. This has the effect of reducing the taxable value of the BiK, often to zero.

Legislation in Finance Bill 2017 will set the date for an employee to make good on benefits in kind which are not accounted for in real time through PAYE (BiKs which are not payrolled). Following the consultation, the government concluded that 6 July following the end of the tax year is an appropriate date, so the taxable value of the BiK will be reduced or removed if making good takes place by that date.

The change will affect making good on a tax liability arising in the tax year 2017 to 2018, and subsequent years.

1.7 Optional remuneration arrangements (salary sacrifice)

As announced at Autumn Statement 2016, legislation will be introduced in Finance Bill 2017 to remove Income Tax and employer National Insurance contributions (NICs) advantages where BiKs are provided through salary sacrifice or other optional remuneration arrangements.

Changes will take effect from 6 April 2017.

A transitional rule will protect employees who are in contractual arrangements before 6 April 2017 until the earlier of a variation or renewal of the contract or 6 April 2018, except for cars with emissions above 75g CO2 per kilometre, accommodation and school fees for which the final date is 6 April 2021. Employer-provided pensions and pension advice, childcare vouchers, employer-provided childcare and workplace nurseries, cycle to work schemes and ultra-low emissions cars, with emissions not exceeding 75g CO2 per kilometre will be excluded from this measure.

1.8 Reform of tax treatment of termination payments

As announced at Budget 2016 and confirmed at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to tighten and clarify the tax treatment of termination payments. This will include making all contractual and non-contractual payments in lieu of notice taxable as earnings and requiring employers to tax the equivalent of an employee’s basic pay if notice is not worked. Legislation will also be introduced in the NICs Bill 2017 to align the tax and employer NICs treatment of termination payments so that employer NICs will be payable on the elements of the termination payment exceeding £30,000 on which Income Tax is due. The first £30,000 of a termination payment will remain exempt from Income Tax and NICs. The changes, including to Foreign Service Relief, will take effect from 6 April 2018. Following consultation on the draft legislation, the government will include legislation to abolish Foreign Service Relief in Finance Bill 2017-18.

1.9 Off-payroll working in the public sector

As announced at Budget 2016 and confirmed at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to reform the off-payroll rules and improve compliance in the public sector. Responsibility for operating the off-payroll working rules, and deducting any tax and NICs due, will move to the public sector body, agency or other third party paying an individual’s personal service company. The change will come into effect from 6 April 2017 and apply across the UK.

As a result of feedback received during the technical consultation, it will be optional for the agency or public sector body to take account of the worker’s expenses when calculating the tax due. This change would put these workers in the same position as other employees, whose employers can choose whether or not to reimburse the expenses they incur. This will not affect the individual’s right to claim tax relief on legitimate employment expenses from HM Revenue and Customs (HMRC). The application of the rules to Parliament and statutory auditors will also be clarified.

1.10 Tackling disguised remuneration avoidance schemes

As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to tackle existing and prevent future use of disguised remuneration avoidance schemes. This will ensure scheme users pay their fair share of Income Tax and NICs. The future use of schemes will be prevented by strengthening the current rules. The existing use of schemes will be tackled by the introduction of a new charge on disguised remuneration loans that were made after 5 April 1999 and remain outstanding on 5 April 2019. Legislation will also be introduced to ensure there is no double taxation.

Following consultation, legislation has been revised to ensure the loan charge and the exclusions operate as intended. The close companies’ gateway will now be introduced in Finance Bill 2017-18 to commence from 6 April 2018. This will allow for further consultation to ensure it is appropriately targeted at disguised remuneration schemes. Proposals on how the tax and NICs arising from the changes will be collected will be set out in a technical consultation later in 2017. Further detail on the revisions can be found in the technical update.

As announced at Autumn Statement 2016, legislation will also be introduced in Finance Bill 2017 to tackle existing and prevent future use of similar schemes used by the self-employed. Legislation preventing the future use of these schemes will have effect from 6 April 2017. The existing use of schemes will also be tackled by the introduction of a new charge on outstanding disguised remuneration loans. This loan charge will operate in a similar way to the employment loan charge outlined in the technical consultation. It will have effect from Royal Assent of Finance Bill 2017.

As announced at Autumn Statement 2016, legislation will be also introduced to prevent employers claiming a deduction when computing their taxable profits for contributions to a disguised remuneration scheme unless Income Tax and NICs are paid within a specified period. This will have effect for contributions made on or after 1 April 2017 (for Corporation Tax purposes) or 6 April 2017 (for Income Tax purposes).

1.11 Life insurance policies - part surrenders and part assignments

As announced at Autumn Statement 2016 and confirmed at Spring Budget 2017, the government will legislate in Finance Bill 2017 to change the current tax rules for part surrenders and part assignments of life insurance policies to allow policyholders who have generated a wholly disproportionate gain to apply to HMRC to have the gain recalculated on a just and reasonable basis.

Following consultation, the legislation has been revised to clarify who can apply, when and how the recalculation is given effect. These changes will have effect from Royal Assent of Finance Bill 2017.

Pensions Tax

1.12 Reducing the money purchase annual allowance

Following a consultation launched at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to reduce the money purchase annual allowance to £4,000 from April 2017. This restricts the amount of tax relieved contributions an individual can make in a year into a money purchase pension, if they have flexibly accessed their pension savings. A response to the consultation will be published on 20 March 2017.

1.13 Changes to tax treatment of foreign pension regimes

As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to more closely align the treatment of foreign pensions with the UK’s domestic pension regime. Following consultation, the legislation has been revised to set out the position for defined benefit specialist pension schemes for those employed abroad (section 615 schemes) and clarify that all lump sums paid out of funds built up before 6 April 2017 will be subject to existing tax treatment. These changes will have effect from 6 April 2017.

As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to apply a 25% tax charge to pension transfers made to QROPS. Exceptions will be made to the charge, allowing transfers to be made tax free where people have a genuine need to transfer their pension, where:

both the individual and the pension scheme are in countries within the European Economic Area (EEA) or

if outside the EEA, both the individual and the pension scheme are in the same country, or

the QROPS is an occupational pension scheme provided by the individual’s employer

If the individual’s circumstances change within 5 tax years of the transfer, the tax treatment of the transfer will be reconsidered. The changes will take effect for transfers requested on or after 9 March 2017.

The government will also legislate in Finance Bill 2017 to apply UK tax rules to payments from funds that have had UK tax relief and have been transferred, on or after 6 April 2017, to a qualifying recognised overseas pension scheme. UK tax rules will apply to any payments made in the first 5 full tax years following the transfer, regardless of whether the individual is or has been UK resident in that period.

Corporation Tax

1.15 Offshore property developers

As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to amend the legislation on profits from trading in and developing land in the UK at sections 76 - 80 Finance Act 2016 to tax all profits arising on or after 8 March 2017.

1.16 Reform of the Substantial Shareholdings Exemption

As announced at Autumn Statement 2016 and confirmed at Spring Budget 2017, the government will legislate in Finance Bill 2017 to simplify the rules, remove the investing company requirement within the Substantial Shareholdings Exemption, and provide a more comprehensive exemption for companies owned by qualifying institutional investors. Following consultation amendments have been made to provide clarity and certainty. The changes will take effect from 1 April 2017.

1.17 Loss relief reform

As announced at Budget 2016, the government will legislate in Finance Bill 2017 to reform the rules governing corporate losses carried forward from earlier periods.

The reform will:

give all companies more flexibility by relaxing the way in which they can use losses arising on or after 1 April 2017 when they are carried forward - these losses will be usable against profits from different types of income and profits of other group companies

restrict the use of losses carried forward by companies so that they can’t reduce their profits arising on or after 1 April 2017 by more than 50% - this restriction will apply to a company or group’s profits above £5 million - carried forward losses arising at any time will be subject to the restriction

The legislation published on 26 January will be revised to include provisions for oil and gas companies and oil contractors. The business impacts published in the Corporation Tax: reform of loss reliefTIIN on 5 December 2016 have not changed. The loss relief reform will take effect from 1 April 2017.

1.18 Northern Ireland Corporation Tax change

As announced at Autumn Statement 2016 and confirmed at Spring Budget 2017, the government will amend the Northern Ireland Corporation Tax to give all small and medium sized enterprises (SMEs) trading in Northern Ireland the potential to benefit. Other amendments will minimise the risk of abuse and ensure the regime is ready for commencement if the Northern Ireland Executive demonstrates its finances are on a sustainable footing. The legislation has been revised with minor drafting improvements to ensure it works as intended.

1.19 Corporation Tax - hybrids and other mismatches

As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to make 2 minor changes to the hybrid mismatch regime. These changes follow discussions with stakeholders and were announced in a technical note at Autumn Statement 2016. The first change removes the need to make formal claim in relation to the permitted time period rules in chapter 3 and 4 of Part 6A Taxation (International and Other Provisions) Act 2010 (TIOPA 2010).

The second change provides that deductions for amortisation are not treated as relevant deductions for the purposes of chapter 5 to 8 of Part 6A.

The hybrid rules tackle aggressive tax planning, typically involving multinational groups, where either one party gets a tax deduction for a payment while the other party doesn’t pay tax on the receipt, or where there is more than one deduction for the same expense. The changes will be effective from 1 January 2017.

1.20 Corporation Tax relief for museums and galleries

As announced at Budget 2016, the government will legislate in Finance Bill 2017 to introduce a new tax relief for museums and galleries who develop new exhibitions including those that are toured. Autumn Statement 2016 announced the rates for the relief as 25% for touring exhibitions and 20% for non-touring exhibitions. The relief will allow museums and galleries to claim a credit worth up to £100,000 on exhibitions that are toured and £80,000 on non-touring exhibitions. The maximum credit allowable is the equivalent of qualifying expenditure of £500,000. Following consultation on the draft legislation, the legislation will be revised to allow for exhibitions which have a live performances as part of the exhibition (but where a live performance is not the main focus of the exhibition).

1.21 Corporation Tax deduction for contributions to grassroots sport

As announced at Autumn Statement 2015 and confirmed at Spring Budget 2017, the government will expand the circumstances in which companies can get deductions for contributions to grassroots sports. Following consultation, the legislation has been amended to extend the treatment of a sport governing body to its 100% subsidiaries. This measure will have effect from 1 April 2017.

1.22 Corporation Tax: Patent Box - cost sharing arrangements

As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to add specific provisions to the revised Patent Box rules introduced in Finance Act 2016, covering the case where Research and Development (R&D) is undertaken collaboratively by 2 or more companies under a cost sharing arrangement. The provisions will ensure that companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way. Following consultation, the legislation will be revised to narrow the definition of a cost-sharing arrangement and to better align the treatment of payments into, and payments received from, a cost-sharing arrangement by the company. These changes will take effect on or after 1 April 2017.

1.23 Corporation Tax: tax deductibility of corporate interest expense

As announced at Budget 2016 and following consultation, the government will introduce legislation with effect from 1 April 2017 to limit the tax deductions that companies can claim for their interest expenses. The new rules will restrict each group’s net deductions for interest to 30% of the earnings before interest, tax, depreciation and amortisation (EBITDA) that is taxable in the UK. An optional group ratio rule, based on the net-interest to EBITDA ratio for the worldwide group, may permit a greater amount to be deducted in some cases. The legislation also provides for repeal of the existing debt cap legislation and its replacement by a modified debt cap which will ensure that the net UK interest deduction doesn’t exceed the total net interest expense of the worldwide group. All groups will be able to deduct up to £2 million of net interest expense per annum, so groups below this threshold will not need to apply the rules.

Draft legislation was published on 5 December 2016 and 26 January 2017. ‎In the light of comments received, changes to the proposed rules will be reflected in Finance Bill 2017, to ensure the rules don’t give rise to unintended consequences or impose unnecessary compliance burdens.‎ In particular:

certain unintended restrictions arising from the modified debt cap that could prevent deductions for carried forward interest expense will be removed

the optional alternative rules for public infrastructure will be easier to apply in practice - there will be no need to compare the level of indebtedness of companies qualifying for these rules with that of non-qualifying group companies, such as those outside the UK, transitional rules will apply in the first year so that business have time to restructure if necessary to qualify for the alternative rules

the rules treat interest on debt guaranteed by related parties as related party interest, which can be subject to restriction - this rule will not apply to certain performance guarantees and all guarantees granted before 31 March 2017, nor will it apply to intra-group guarantees in the context of the group ratio rule

the definition of interest will include income and expenses from dealing in financial instruments as part of a banking trade

rules will be introduced for insurers regarding the calculation of interest on an amortised cost basis to provide a practical alternative to fair value accounting

1.24 Tax treatment of appropriations to trading stock

As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to remove the ability of businesses with loss-making capital assets to obtain an unfair tax advantage by converting those losses into more flexible trading losses. The changes will take immediate effect from Budget on 8 March 2017.

As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to simplify the process for opting fields out of the Petroleum Revenue Tax (PRT) regime. It will also simplify certain reporting requirements for those participators who remain in the PRT regime by removing some elements which are no longer relevant. Following consultation, the legislation has been revised to make 2 consequential amendments to other PRT legislation. The legislation will have retrospective effect from 23 November 2016.

Inheritance Tax

1.26 Reform of domicile rules and Inheritance Tax

As announced at Summer Budget 2015, from April 2017 non-UK domiciled individuals (‘non-doms’) will be deemed domiciled in the UK for tax purposes where they have been UK resident for 15 of the past 20 tax years. Additionally, individuals who were born in the UK with a UK domicile of origin, but have acquired a domicile of choice elsewhere, will be deemed UK domiciled for all tax purposes while they are UK resident. Non-doms who set up a non-UK resident trust before becoming deemed domiciled in the UK will not be taxed on any income and gains retained in that trust.

As previously announced at Summer Budget 2015 and following further consultation on draft legislation published in December 2016 on charging Inheritance Tax (IHT) on UK residential property, the limit below which minor interests in UK property are disregarded has been increased from 1% to 5% of an individual’s total property interests.

As first announced at Summer Budget 2015, from April 2017 IHT will be charged on all UK residential property even when indirectly held by a non-dom through an offshore structure.

As announced at Budget 2016, non-doms will be able to segregate amounts of income, gains and capital within their overseas mixed funds to provide certainty on how amounts remitted to the UK will be taxed. Following consultation on the draft legislation this will be extended by government amendment to income, gains and capital held in mixed funds from years before 2007 to 2008, as well as those from subsequent years.

Those who become deemed domicile in April 2017, excepting those who were born in the UK with a UK domicile of origin, will be able to treat the cost base of their non-UK based assets as the market value of that asset on 5 April 2017.

The government will legislate these reforms in Finance Bill 2017 to have effect from 6 April 2017.

Insurance Premium Tax

1.27 Insurance Premium Tax

As announced at Autumn Statement 2016 and confirmed at Spring Budget 2017, the government will legislate in Finance Bill 2017 to increase the standard rate of Insurance Premium Tax (IPT) by 2% from June 2017. It will also repeal the current anti-forestalling legislation in sections 67 to 67C of the Finance Act 1994 and introduce anti-forestalling legislation to take effect from 8 March 2017.

Indirect Tax

1.28 Landfill Tax - definition of taxable disposal

As announced at Budget 2016, and following consultation over summer 2016, legislation will be introduced in Finance Bill 2017, and in secondary legislation, to amend the definition of a taxable disposal for Landfill Tax. The changes clarify the tax treatment of material disposed of at landfill sites and give greater certainty to landfill site operators. Following technical consultation, the draft legislation has been restructured to simplify and improve ease of comprehension. The measure will come into effect after Royal Assent of Finance Bill 2017 and the changes will apply to disposals to landfill in England, Wales and Northern Ireland.

1.29 Fulfilment House Due Diligence Scheme

As announced at Budget 2016 and confirmed at Autumn Statement 2016, the government will legislate for the Fulfilment House Due Diligence Scheme (FHDDS) in Finance Bill 2017. The draft legislation was published for consultation on 5 December 2016. The scheme will require all UK fulfilment houses to register with HMRC from 1 April 2018 and comply with record-keeping and due diligence standards. Following the consultation, the draft legislation has been revised to provide for a disclosure gateway that will permit HMRC to disclose taxpayers’ information to fulfilment houses for the purpose of meeting their obligations under the scheme.

Excise duties

1.30 Minimum Excise Tax

As announced at Spring Budget 2017, the Minimum Excise Tax (MET) will be set at £268.63 per 1000 cigarettes. It will take effect from 00:01am on 20 May 2017. This is in accordance with the Budget 2016 announcement that the government would legislate in Finance Bill 2017 to introduce a MET for cigarettes. A MET sets a minimum level of total duty for all packets of cigarettes, which will tackle the very cheapest cigarettes. This change applies to cigarettes sold in the UK.

1.31 Gaming Duty

As announced at Budget 2016, the government will legislate in Finance Bill 2017 to raise the Gross Gaming Yield (GGY) bandings for Gaming Duty in line with inflation (based on Retail Prices Index (RPI)). The revised GGY bandings used to calculate Gaming Duty must be used for accounting periods starting on or after 1 April 2017. The GGY bandings are published in Annex A.

1.32 Remote Gaming Duty: freeplays

As announced at Budget 2016 the government will legislate in Finance Bill 2017 to amend the definition of gaming payments and prizes, and change the tax treatment of freeplays, for Remote Gaming Duty. Following a technical consultation draft legislation has been revised to ensure the change is proportionate. The proposed legislation will ensure that, where appropriate, freeplays used to participate in remote gaming will have a value as stakes when calculating the operator’s dutiable profit, and that freeplays given as prizes will not be deductible.

1.33 Soft Drinks Industry Levy

As announced at Budget 2016 and confirmed at Autumn Statement 2016, the government will legislate in Finance Bill 2017 for the Soft Drinks Industry Levy. The 2 thresholds, at 5g and 8g of sugar per 100ml, have been designed so that, by taking reasonable steps to reduce sugar content, UK producers and importers of soft drinks can pay less or escape the charge altogether. The rates were announced at Spring Budget 2017 and will be 18 pence per litre (ppl) for the main rate and 24ppl for the higher rate. Following consultation the legislation has been revised to include a criminal offence for evasion of the levy. Minor amendments have also been made to improve clarity. The levy will take effect from April 2018.

1.34 Air Passenger Duty rates

As announced at Budget 2016, the government will legislate in Finance Bill 2017 to increase Air Passenger Duty rates in line with RPI from 1 April 2017.

As announced at Spring Budget 2017, the government will also legislate in Finance Bill 2017 to increase Air Passenger Duty rates in line with RPI from 1 April 2018.

1.35 Alcohol Duty rates

As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to increase the duty rates on beer, cider, wine and made-wine and spirits in line with inflation (based on RPI), in line with previous forecasts. These changes will take effect from 13 March 2017.

1.36 Tobacco Duty rates

As announced at Spring Budget 2017, the duty rates for all tobacco products will be increased by 2% above RPI inflation from 6pm on 8 March 2017. This is in accordance with the Budget 2014 announcement that all Tobacco Duty rates will increase by this amount each year until the end of the current Parliament.

Legislation for these changes will be introduced in Finance Bill 2017 and the rates are set out in Annex A.

1.37 Vehicle Excise Duty uprating

As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to increase Vehicle Excise Duty (VED) rates for cars, motorcycles and vans registered before 1 April 2017, by the RPI with effect from 1 April 2017. Details of the VED rate changes are published in Annex A.

Avoidance and evasion

1.38 Disclosure of indirect tax avoidance schemes

As announced at Autumn Statement 2016, legislation will be introduced in Finance Bill 2017 to strengthen the regime for the Disclosure of Indirect Tax Avoidance. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the legislation will be extended to include all indirect taxes, including the Soft Drinks Industry Levy. Details of the tests to apply to arrangements to determine if they should be disclosed to HMRC will be contained in regulations. These measures will come into effect on 1 September 2017.

1.39 VAT: penalty changes in fraud cases

As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to introduce a penalty for participating in VAT fraud.

Following consultation on the draft legislation some minor changes have been made to improve the clarity of the measure and also to limit the naming of a company officer to instances where the amount of tax due exceeds £25,000. The new penalty will take effect once the Finance Bill receives Royal Assent.

1.40 Promoters of Tax Avoidance Schemes

As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to ensure that promoters of tax avoidance schemes can’t circumvent the Promoters of Tax Avoidance Schemes (POTAS) regime by re-organising their business by either sharing control of a promoting business or putting a person or persons between themselves and the promoting business. This will ensure HMRC can apply the POTAS regime as intended. The changes will take effect from 8 March 2017.

1.41 Strengthening tax avoidance sanctions and deterrents

As announced at Autumn Statement 2016 and confirmed at Spring Budget 2017, the government will introduce a new penalty on those individuals or entities who enable the use of‎ tax avoidance arrangements which HMRC later defeats (‘enablers’). This new regime reflects an extensive consultation and input from stakeholders. The legislation will also provide clarification as to what constitutes ‘reasonable care’ in relation to the application of the penalties charged on taxpayers following the defeat of tax avoidance.

Following consultation, the enablers legislation has ‎been revised to provide further detail of when and how the General Anti Abuse Rule (GAAR) Advisory Panel will consider enabler cases. Further changes have been made to apply the enablers regime to arrangements that seek to avoid NICs, to make consequential changes to the Promoters of Tax Avoidance Scheme legislation and to provide further detail regarding when enablers will be named. Minor amendments have also been made to further improve the clarity and targeting of both the legislation for enablers and reasonable care.

The changes relating to reasonable care come into effect at Royal Assent and apply to inaccuracies in documents relating to tax periods which begin on or after 6 April 2017‎. The penalty for enablers will apply prospectively to enabling activity after Royal Assent.

1.42 Offshore evasion: requirement to correct previous non-compliance

As announced at Budget 2016, legislation will be introduced in Finance Bill 2017 for a new legal requirement for those who have failed to declare UK tax on offshore interests to correct that situation, with tougher sanctions for those who fail to do so before 1 October 2018. This new ‘requirement to correct’ is expected to come into force when the Finance Bill 2017 receives Royal Assent and will apply to all taxpayers with offshore interests who have not complied with their UK tax obligations as at 5 April 2017. Following consultation a response document was published on 5 December 2016. The draft legislation will be revised to ensure the reasonable excuse provision doesn’t apply where advice is received from an adviser who is not independent. This reflects the government’s response on this point in the document published on 5 December 2016.

Tax administration

As announced at Autumn Statement 2015 and following technical consultation on draft legislation published on 5 December 2016, legislation will be introduced in Finance Bill 2017 to control the use and ownership of tobacco manufacturing machinery in the UK. This is to help prevent the illicit manufacture of tobacco products, by providing powers to establish a licensing regime for tobacco manufacturing machinery in secondary legislation. This will include powers to make provision for forfeiture of unlicensed tobacco manufacturing machinery and penalties for failure to comply with conditions of the licence. The powers in the legislation will take effect from the date Finance Bill 2017 receives Royal Assent.

Making Tax Digital

1.44 Increasing the cash basis entry threshold

As announced in January 2017, the government will increase the trading cash basis thresholds for unincorporated businesses. Increasing the cash basis thresholds will make it easier for businesses to work out if their expenditure is deductible for tax. Following consultation, and as announced in January 2017, from the 2017 to 2018 tax year the general entry threshold for the trading cash basis will be increased to £150,000. (For Universal Credit claimants, the entry threshold will be increased to £300,000.) The exit threshold will be increased to £300,000 for all users of the trading cash basis.

1.45 Simplified cash basis for unincorporated businesses

As announced in January 2017, the government will legislate in Finance Bill 2017 to provide a simple list of disallowed expenditure in order to simplify the rules for allowable deductions within the cash basis. Following consultation, the legislation has been revised slightly to make certain that specific items are clearly excluded from the list, and to ensure the rules for moving between the cash basis and accruals accounting are robust. Minor amendments have also been made to improve clarity. These changes will have effect from April 2017, though for the 2017 to 2018 tax year trading profits can be calculated using either the new rules or the existing rules.

1.46 Simplified cash basis for unincorporated property businesses

As announced in August 2016 and confirmed at Spring Budget 2017, the government will legislate in Finance Bill 2017 to allow most unincorporated property businesses (other than Limited Liability partnerships, trusts, partnerships with corporate partners or those with receipts of more than £150,000) to calculate their taxable profits using a cash basis of accounting. Landlords will continue to be able to opt to use Generally Accepted Accounting Principles (GAAP) to prepare their profits for tax purposes.

Those with both a UK and an overseas property business will be able to choose separately whether to use the cash basis or GAAP for each. Those with a trade as well as a property business both eligible for the cash basis, will be able to decide separately for each of these, and persons other than spouses or civil partners who jointly own a rental property will be able to decide individually.

To align the treatment with those who opt to use GAAP, the initial cost of items used in a dwelling house will also not be an allowable expense under the cash basis. The existing ‘replacement of domestic items relief’ will continue to be available for the replacement of these items when the expenditure is paid. Interest expense will be treated consistently between those using the cash basis and those using GAAP.

The changes will have effect from 6 April 2017.

1.47 Making Tax Digital for Business

As announced at Autumn Statement 2015 and confirmed at Budget 2016 and Spring Budget 2017, the government will legislate in Finance Bill 2017 to implement digital record keeping and updating by businesses, the self-employed and landlords, as part of Making Tax Digital for Business. As also announced the start date for mandation for unincorporated businesses and landlords with gross income (turnover) below the VAT registration threshold will be deferred until April 2019. This change will be made through regulations. The legislation includes powers to make regulations, including on the form and content of periodic updates and ‘end of period statements’. There are also powers to set out the scope and operation of certain exemptions by regulations. Following consultation, the legislation published in draft on 31 January 2017 has been revised and expanded to:

provide explicitly for income-based exemptions to be introduced through regulations

allow businesses with profits chargeable to Income Tax to finalise their total income chargeable to Income Tax and National Insurance contributions for any tax year, make a final declaration about this income (outside of any ‘end of period statement’ in relation to business income) and any chargeable gains

replicate existing Income Tax compliance powers so that they apply to the Making Tax Digital for Business requirements

make miscellaneous consequential amendments to the Taxes Management Act 1970

introduce a clause amending Schedule 11 to the Value Added Tax Act 1994, to enable equivalent regulations and exemptions for VAT purposes to those proposed for Income Tax

The legislation will generally have effect from Royal Assent, but some consequential amendments will apply from specific future Income Tax years of assessment.

1.48 Measures unchanged following consultation

These measures were published on 5 December 2016 for consultation on the draft legislation. Following this consultation there has been no significant changes to the legislation, which will appear in Finance Bill 2017.

The list indicates which draft clause at 5 December 2016 the measure refers to.

2. Future tax changes

Income Tax

2.1 Venture capital schemes administration

2.2 Rent-a-Room relief

As announced at Spring Budget 2017, the government will consult on proposals to rent-a-room relief to ensure it is better targeted to support longer-term lettings. This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings.

2.3 Partnership taxation: proposals to clarify tax treatment

As announced at Autumn Statement 2016, the government will publish a response document and draft legislation to clarify and improve aspects of partnership taxation. The government intends to legislate in Finance Bill 2017-18.

Employment and benefits in kind

2.4 Employee expenses

As announced at Autumn Statement 2016, the government will publish a call for evidence on 20 March 2017 to better understand the use of the Income Tax relief for employees’ expenses, including those that are not reimbursed by their employer.

2.5 Employer-provided accommodation

As announced at Autumn Statement 2016, the government will publish a consultation paper with proposals to bring the tax treatment of employer-provided living accommodation and board and lodgings up to date. This will include proposals for when accommodation should be exempt from tax and support taxpayers during any transition.

The government has already announced that it will abolish Class 2 NICs from April 2018. On its own this would increase the differential between the rates of National Insurance paid by employees and those paid by the self-employed. As announced at Spring Budget 2017 the government will legislate to increase the main rate of Class 4 NICs from 9% to 10% with effect from 6 April 2018 and from 10% to 11% with effect from 6 April 2019. Since April 2016, the self-employed also have access to the same State Pension as employees, worth £1,800 a year more to a self-employed individual than under the previous system.

A TIIN for this measure will be published alongside the legislation.

2.7 Removing NICs from the effects of Limitation Act and aligning recovery of debts

As announced at Autumn Statement 2016, the government will remove NICs from the effects of the Limitation Act 1980 and will align the time limits for the recovery of NICs debts with those for tax. To allow more time for a full consultation on the draft legislation, the government will be deferring this and will introduce the measure in a future NICs Bill.

2.8 Taxation of benefits in kind

As announced at Spring Budget 2017, the government will publish a call for evidence on 20 March 2017 on exemptions and valuation methodology for the Income Tax and employer NICs treatment of benefits in kind in order to better understand whether their use in the tax system can be made fairer and more consistent.

2.9 Patient Capital review

As announced at Spring Budget 2017, the government will consider existing tax reliefs aimed at encouraging investment and entrepreneurship to make sure that they are effective, well targeted, and still provide value for money as part of the Patient Capital review.

2.10 Image rights

As announced at Spring Budget 2017, HMRC will publish guidelines in spring 2017 for employers who make payments for image rights to their employees to improve the clarity of the existing scheme.

Pensions Tax

2.11 Master trusts tax registration

As announced at Spring Budget 2017, the government will amend the tax registration process for master trust pension schemes to align with the Pensions Regulator’s new authorisation and supervision regime. This will help to boost consumer protection and improve compliance. Legislation will be included in Finance Bill 2017-18 and will apply to all master trust pension schemes from October 2018.

Corporation Tax

As announced at Spring Budget 2017, the government will consult in summer 2017 on the legislative changes required following the announcement of the International Accounting Board’s new leasing standard – IFRS16, which comes into effect on 1 January 2019. The tax treatment of a lease, in some important respects, is determined by its treatment in the accounts. Following the discussion document published in summer 2016, the government intends to maintain the current system of lease taxation by making legislative changes which enable the rules to continue to work as intended.

2.13 Research and development (R&D) tax review

As announced at Spring Budget 2017, the government will make administrative changes to research and development (R&D) tax credits, following a review of the tax environment for R&D. This will increase the certainty and simplicity around claims, and will take action to improve awareness of R&D tax credits among SMEs.

As announced at Spring Budget 2017, the government will introduce an exemption from withholding tax for interest on debt traded on a multilateral trading facility, removing a barrier to the development of UK debt markets, and will consult from spring 2017 on implementation.

The government will seek State Aid approval to extend provision of this tax relief beyond 2018.

2.16 Extension of High-end TV, animation and video games tax reliefs

The government will seek State Aid approval for the continued provision of the reliefs beyond 2018.

2.17 Oil and Gas taxation: extension to investment and cluster area allowances

As announced at Summer Budget 2015 and consulted on in 2016, the government will lay the ‘Investment Allowance and Cluster Area Allowance (Investment Expenditure) Regulations 2017’ before the House of Commons on 8 March 2017. These will deliver government’s commitment to extend the scope of the allowances to include some operating and leasing expenditure. The legislation will have retrospective effect for qualifying expenditure incurred on or after 8 October 2015.

2.18 Oil and gas: tax for late life oil and gas assets

As announced at Spring Budget 2017, the government is committed to a competitive tax regime that supports the transfer of late-life UK oil and gas assets. To determine the best approach a formal discussion paper will be published on 20 March 2017. A new advisory panel of industry experts will also be established to consider this matter.

Corporation Tax and Capital Gains Tax

As announced at Autumn Statement 2016, the government will consult on the case and options for bringing non-UK resident companies, who are currently chargeable to Income Tax on their UK taxable income, and to non - resident Capital Gains Tax (CGT) on certain gains, within the scope of Corporation Tax. Under such a move, these companies would then be subject to the rules which apply generally for the purposes of Corporation Tax, including the limitation to corporate interest expense deductibility and loss relief rules.

Indirect Tax

2.20 HGV Vehicle Excise Duty and HGV Levy

As announced at Spring Budget 2017, the government will freeze rates of VED for HGVs in 2017 to 2018, which includes all rates linked to the basic goods rate. Levy rates will also be frozen from 1 April 2017. The government will also launch a call for evidence in spring 2017 on updating the existing HGV Road User Levy so that it rewards hauliers that plan their routes effectively, to incentivise the efficient use of roads, and improve air quality.

2.21 Value of the Landfill Communities Fund

As announced at Spring Budget 2017, the value of the Landfill Communities Fund for 2017 to 2018 will remain unchanged at £39.3 million and the cap on contributions by landfill operators will be increased from 4.2% to 5.3%. This cap will be maintained subject to consideration of Landfill Tax receipts, continued progress in reducing the level of unspent funds held by environmental bodies and the proportion of LCF funds spent on administration costs. A statutory instrument will be laid on 10 March 2017. The changes will take effect from 1 April 2017.

2.22 Landfill Tax – extending the scope to illegal disposals

As announced at Spring Budget 2017, the government will consult on extending the scope of Landfill Tax to material disposed at illegal waste sites. Landfill Tax is currently only chargeable on waste disposed of at permitted sites in England, Wales, and Northern Ireland. As such, the aim of this measure is to tackle the evasion of Landfill Tax resulting from the disposal of material at illegal waste sites, and deter environmentally damaging behaviour.

A consultation document will be published on 20 March 2017.

2.23 Aggregates Levy

As announced at Spring Budget 2017 the government will freeze the aggregates levy rate for 2017 to 2018 at £2 per tonne. This continues the freeze that has been in place since 2009.

2.24 Alcohol Duty rates and bands

As announced at Spring Budget 2017, the government will publish a consultation on 20 March 2017 on:

introducing a new band for still cider just below 7.5% adv. to target white ciders

the impacts of introducing a new duty band for still wine and made-wine between 5.5% and 8.5% abv

2.25 Heated Tobacco consultation

As announced at Budget 2016, the government will consult on the duty treatment of heated tobacco products. The consultation will be launched on 20 March 2017, and will inform future decisions on the duty regime for these products. If legislation is required following the consultation, it will be introduced in a future Finance Bill.

A consultation document will be published on 20 March 2017.

2.26 Red diesel call for evidence

As announced at Spring Budget 2017, the government will publish a call for evidence alongside Finance Bill 2017 on the use of rebated gas oil (often called red diesel) in order to improve understanding of eligible industries and current use in particular in urban areas. The call for evidence will be published on 20 March 2017.

2.28 VAT: ‘split payments’ model

As announced at Budget 2016, the government is considering alternative methods of collecting VAT. This is in addition to the measures it has already introduced to tackle the problem of overseas businesses selling goods to UK consumers via online marketplaces without paying VAT. At Spring Budget 2017, the government will publish a call for evidence on 20 March 2017 on the case for a new VAT collection mechanism for online sales. This would harness technology to allow VAT to be extracted directly from transactions at the point of purchase. This type of model is often referred to as split payment.

A call for evidence will be published on 20 March 2017.

2.29 VAT: use and enjoyment provisions for business to consumer mobile phone services

As announced at Spring Budget 2017, the government will remove the VAT use and enjoyment provision for mobile phone services provided to consumers. The measure will bring those services used outside the EU within the scope of the tax. It will also ensure mobile phone companies can’t use the inconsistency to avoid UK VAT. This will bring UK VAT rules in line with the internationally agreed approach

Secondary legislation to effect the change together with a TIIN will be published before summer recess.

2.30 VAT: fraud in the provision of labour in the construction sector

As announced at Spring Budget 2017, the government will launch a consultation on 20 March 2017 on a range of policy options to combat supply chain fraud in supplies of labour within the construction sector. Options include a VAT reverse charge mechanism so the recipient accounts for VAT. It will also consider other changes including to the qualifying criteria for gross payment status within the Construction Industry Scheme. The government is consulting to ensure any option taken forward is targeted effectively, is simple to operate and minimises impacts on businesses, whilst tackling the fraud as effectively as possible.

A consultation document will be published on 20 March 2017.

Stamp Duty Land Tax

2.31 Stamp Duty Land Tax: accelerating receipts

As announced at Autumn Statement 2015, the government consulted in 2016 on a reduction in the Stamp Duty Land Tax (SDLT) filing and payment window from 30 days to 14 days, as well as on the SDLT filing and payment process generally. After consideration of the responses, the government will delay the reduction in the filing and payment window until after April 2018.

Avoidance and evasion

2.32 Hidden economy – sanctions and conditionality

Following consultation and an announcement at Autumn Statement 2016, the government will take further action to tackle the hidden economy. It will:

develop further proposals on conditionality - the principle of making access to certain licences or services conditional on tax registration - and explore options to trial conditionality through pilot activity - there is a good case for conditionality as a tool to prevent non-compliance, the government recognises that conditionality must also minimise burdens for compliant businesses and providers of licences or services

consider the design of a stronger ‘failure to notify’ hidden economy penalty which may take account of past behaviour, this will be delivered as part of the longer term HMRC Penalties Review

HMRC will also strengthen its monitoring of taxpayers found to be operating in the hidden economy, to keep them compliant

These measures will tackle the hidden economy and level the playing field between compliant and non-compliant businesses.

2.33 National Insurance Employment Allowance

As announced at Spring Budget 2017, HMRC is actively monitoring compliance with the National Insurance Employment Allowance, following reports of some businesses using avoidance schemes to avoid paying the correct amount of National Insurance contributions. The government will consider taking further action in the event that this avoidance continues.

Tax administration

2.34 Digital tax administration

As announced at Spring Budget 2017, the government will consult on proposals for late submission penalties and charging of penalty interest on late payments. The government previously consulted on a model for late submission penalties. The government will also consult on the design aspects, of the tax administration system, including interest and penalties, with the aim of adopting a consistent approach across taxes. This will simplify the system for taxpayers.

A consultation document will be published on 20 March 2017.

2.35 HMRC Large Business Risk Review

As announced at Spring Budget 2017, HMRC will launch a consultation into its process for risk profiling large businesses. The consultation will review how HMRC can promote stronger compliance. The consultation will be released ahead of the summer recess and will run for 12 weeks.

2.36 Employment Allowance - illegal workers restriction

As announced at Spring Budget 2016, the government consulted from November 2016 to January 2017 on restricting the Employment Allowance for one year from employers who receive a civil penalty from the Home Office. Following this consultation, the government has decided that this should not be taken forward at this point in time, because of concerns raised around complexity.

2.37 Double taxation treaty passport scheme

As announced at Spring Budget 2017, the government will renew and extend the administrative simplifications of the Double Taxation Treaty Passport scheme to assist foreign lenders and UK borrowers. The scheme simplifies, for overseas lenders, access to reduced withholding tax rates on interest that are available within the UK’s tax treaties with other territories. The Double Taxation Treaty Passport scheme was previously restricted to corporate lenders and corporate UK borrowers - from 6 April 2017, this restriction will be removed and will now apply to all types of overseas lenders and UK borrowers. Guidance and the revised terms and conditions applying to this scheme will be published on GOV.UK on 6 April 2017.

Table 1: measures without a corresponding announcement in the Budget HM Treasury report

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